Prospects for the UK economy, in brief

The NIESR has published its latest ‘Prospects for the UK economy’ this morning - this link given is to the one-page press release. This clear document gives some stark headlines from their predictions: they consider the persistent weakness in the economy to be unprecedented, they continue to expect that CPI will fall below target by the end of the year, and they believe that unemployment will rise to 9% and stay there for some years, doing permanent damage to the supply side of the UK economy. They estimate that a 1 per cent of GDP increase in government investment this year would boost GDP by around 0.7 per cent, and would provide a boost to the short-run lack of aggregate demand. They do predict a return to growth in 2013, with some above-average growth figures for 2014, which may return the economy to its size of 2008. For the sake of the students sitting their AS and A levels in the next few weeks, let us hope that they are right.